Territorial jurisdiction under Section 20 extends to Union functions at New Delhi as principal place of business.

For territorial jurisdiction under Section 20 of the Code of Civil Procedure, the expression "carries on business" is treated broadly and is not confined to commercial or profit-making activity. The Union and other juristic persons may fall within that phrase when conducting affairs and discharging functions, and the seat of the Central Government at New Delhi may be treated as the principal place of business for jurisdictional purposes. The earlier narrow view limiting the phrase to commercial activity is rejected, with emphasis on the Union's ultimate control from the seat of government and the distinction between sovereign and non-sovereign functions.

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Issues: Whether the Union could be said to be carrying on business at the seat of the Central Government at New Delhi so as to confer territorial jurisdiction on the Court under Section 20 of the Code of Civil Procedure in proceedings on an arbitral award.

Analysis: The expression "carries on business" in Section 20 was held to be of wide amplitude and not confined to commercial or profit-making activity. It was read as extending to the conduct of affairs and discharge of functions by juristic persons, including the State and the Union. The earlier construction limiting the expression to commercial activity was rejected in the light of the settled understanding of State activity, the constitutional power of the Union to carry on trade or business, and the distinction between sovereign and non-sovereign functions. The Court also noted that the Union exercises ultimate control from the seat of the Central Government, which may be treated as the principal place of its business for the purpose of jurisdiction.

Conclusion: The Union was held to be carrying on business at New Delhi for the purpose of Section 20 of the Code of Civil Procedure, and territorial jurisdiction was upheld in favour of the petitioner.

Final Conclusion: The territorial-jurisdiction objection failed, and the proceedings could be entertained by the Court.

Ratio Decidendi: For the purpose of Section 20 of the Code of Civil Procedure, the expression "carries on business" includes the Union's conduct of its affairs and functions, and jurisdiction lies where its principal place of control and business is situated.

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